Wells Fargo Downgrades MarkWest Energy Partners, L.P. (MWE) to Market Perform

October 22, 2009 8:43 AM EDT

Wells Fargo downgrades MarkWest Energy Partners, L.P. (NYSE: MWE) to Market Perform from Outperform.

Wells analyst says, "We are increasing valuation ranges across our MLP coverage universe by 12% (median). Our revised valuation ranges suggest MLPs still have moderate upside potential with an estimated median total return of 13% (target yield of 8.0% and 2010E distribution growth of 2.8%). Specifically, we are lowering the required rate of return (ROR) in our distribution discount models (DDM) by 100-200 bps in recognition of investors’ increased risk appetite...As a result of our valuation adjustments, we are downgrading MarkWest Energy to Market Perform."

"Our valuation range is based on a blend of (1) our three-stage distribution discount model, which assumes a required rate of return of 11.0% and a long-term growth rate of 2.5%, and (2) a price-to-distributable cash flow multiple of about 8.5x our 2010 estimate. Risks to the units trading in our range include a decline in commodity prices, execution risk related to acquisitions, and rising interest rates."

To see more analyst ratings on MWE Click Here.

MarkWest Energy Partners, L.P. and its subsidiaries engage in the gathering, compression, treatment, processing, and transportation of natural gas in the United States.

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